Oil Prices going down ?
Due to COVID-19 and lock-down gas use faced humongous
decrease which affected the price of crude oil.
But what do we do if nobody wants the crude oil that comes
out of oil wells? We can’t just turn the
well off if we want the option to get oil from it in the future,so oil is going
to keep coming out of the well and you are going to have to get someone to take
it off your hands, even if that means paying someone to do it. That’s why the
price of crude oil can go below $0.
If crude oil is essentially free right now and expected to
still be very cheap in June, why are we still paying $2 per gallon for gasoline?
Crude oil is not directly put in gas tanks we need a refiner to make gasoline
from the crude oil, and oil refiners have cut their production. Some have
closed entirely while extractors continue to produce — is the reason behind
charges for oil storage have increased and market participants are concerned
about running out of places to store crude oil. Let's not neglect the
operations of gas stations. They are able to buy gasoline much more cheaply at
wholesale than they could a couple of months ago, but they are also selling
much less volume of gasoline. As such, they need a higher markup per gallon to
cover their non-fuel costs than they used to, and average retail gasoline
prices are only down 97 cents per gallon from a year earlier.
Falling prices benefits consumers that go a long way to
offset the economic costs from lower income to oil company owners and workers.
Yet it’s not clear when or how much you will get to enjoy any benefit from the
price crash. When the economy gets going again, they will be slow to start
production back up. Market participants expect oil prices next year to be over
$30 a barrel — which means as the economy restarts, you should be able to enjoy
lower gas prices than in 2019.
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